Local retailers hope for recovery in five years
JAKARTA (JP): Local retailers, wilting from depressed market demand amid the country's worst economic recession in over 32 years, are expecting a strong turnaround in only five years.
The executive director of the Indonesian Retail Merchants Association (Aprindo), Kustarjono Projololito, said on Wednesday the association predicted robust economic growth at the precrisis level to restart in 2004.
"The economy will remain mired in the doldrums until 2003, eroding the purchasing power of consumers and consequently depressing market demand, " Kustarjono told reporters on the sidelines of a seminar on the retail business.
Sinking sales volume, thin margins and constant threats of security disturbances have assaulted the retail industry since early 1998 when the full brunt of the financial meltdown lashed the economy.
Kustarjono said retail sales turnover this year would likely remain at last year's level of Rp 170 trillion, but soaring prices of products could keep sales volume down by 40 percent.
Last year, sales volume dropped by 30 percent as higher prices discouraged shoppers from opening their pocketbooks, he said.
Kustarjono said of the Rp 170 trillion rung up in sales last year, only Rp 25 trillion was generated by department stores, supermarkets, grocery stores and other modern retailers.
The rest was recorded by smaller retailers and vendors in traditional markets.
Kustarjono said retailers survived mostly by slashing their margins and cutting operational costs.
On average, retailers dealt with a 10 percent margin, but some stores were forced to slash their margins to 2.5 percent to 5 percent to stay open, he said.
Security
Most retailers are concerned about a possible new wave of social unrest and riots amid simmering political tension in the run-up to the June general election.
Fatal riots last May, which contributed to president Soeharto's resignation, caused Rp 661.52 billion in total losses to Aprindo members.
Kustarjono said insurance firms had failed to settle most claims by Aprindo members exceeding Rp 20 billion, although claims on lesser amounts were paid.
Aprindo chairman Steve Sondakh said local retailers were spending more on beefing up security at their properties, which meant additional operational costs.
Most of the additional expenditures went to deployment of members of the military to guard the premises.
The director of human resources and public relations for large retail chain Ramayana, Setyadi Surya, said his company now spent five times more on security than before the May riot.
" Our budget for security used to be in the range of tens of million of rupiah every month. Now, it reaches hundreds of millions."
Twelve Ramayana stores were burned during the riots, and 14 others were looted and vandalized, incurring damage of Rp 150 billion. Insurance firms have not paid compensation.
The 14 looted stores have reopened, but operations have yet to resume at the burned businesses.
Setyadi said Ramayana planned to reopen four of the 12 burned stores with additional investment of Rp 100 billion.
Reconstruction work is continuing on stores in Tangerang (West Java), Cengkareng (West Jakarta), Tanjung Priok (North Jakarta) and Ciputat (South Jakarta), he said.
"They will reopen after June, depending on the election outcome," he said.
With the reoperation of the stores, the company expects sales to rise to Rp 1.25 trillion this year from Rp 1 trillion last year, Setyadi said. (das)